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O’Malley floats 1-cent sales tax hike

ANNAPOLIS – Gov. Martin O’Malley floated a 1-cent sales tax increase on Wednesday as another potential remedy to the state’s persistent and widespread money problems.

The idea appeared to catch lawmakers off guard as they gathered in the State House for the start of the 90-day legislative session that will have them debating increased spending on transportation, schools and environmental projects as well how to bridge a $1.1 billion budget deficit.

A penny on the sales tax is worth about $600 million in annual revenue to the state.

“If we were to raise the sales tax by another penny, it would be a broad-based thing to do and it would enable us to do a lot of the things that have to get done in the course of this session,” said O’Malley, a Democrat. “I know there’s not very much public will for that.”

“It’s a nonstarter,” said Senate President Thomas V. Mike Miller Jr., D-Calvert and Prince George’s. “We just raised the sales tax a few years ago.”

The General Assembly raised the sales tax by a penny in 2007 — to 6 cents on the dollar — at O’Malley’s urging.

House of Delegates Speaker Michael E. Busch, D-Anne Arundel, said any revenue increases this year should be more narrowly focused and tied to state construction projects.

“I think the key to all this is that whatever investment we make, we’re putting people to work in the private sector,” he said.

Aides to the governor said they do not expect him to introduce a sales tax increase.

Even O’Malley painted the idea as Plan B if lawmakers can’t stomach other tax hikes.

“It’s another idea,” he said. “If the legislature doesn’t like the things that are proposed, I think we should remember that no one in our state lost a house, lost a job or lost a business because of the additional penny on the sales tax. These bridges don’t build themselves.”

Commissions studying shortfalls in funding for Chesapeake Bay cleanup and transportation projects recommended tripling the state’s “flush tax” to $90 per year to pay for sewage treatment plant upgrades and increasing the gas tax by 15 cents over three years as part of a plan to raise $800 million more for roads and bridges.

The gas tax is 23.5 cents per gallon and was last raised in 1992.

“We’ve never gone 20 years without [an increase].” said Donald C. Fry, president and CEO of the Greater Baltimore Committee and a former state lawmaker. “There are more than $40 billion worth of projects that need to be addressed.”

The governor’s budget and legislative agenda are expected to address both issues. Both are due next week, but O’Malley has not yet revealed his plans.

O’Malley announced Tuesday he will seek $372 million for school construction in the coming year. It would be the second-most Maryland has ever spent for that purpose, and the administration hopes it will leverage up to $571 million from local governments and support 11,650 jobs.

Republicans bristled at the prospect of higher taxes and more borrowing.

“Raising taxes will kill jobs,” said House Minority Leader Anthony J. O’Donnell, R-Calvert and St. Mary’s.

O’Donnell said a higher gas tax would trickle down into the price of many household goods because it would cost more to ship them in Maryland.

“We have to be very careful that we don’t stifle job creation,” he said.

Offshore wind power will also be on the agenda this year.

The chairmen of the committees that will handle the issue said they expect the state to follow a model set by New Jersey and create offshore wind energy credits that utilities can buy and sell.

Maryland took a similar tack with solar energy, requiring that a slice of the state’s renewable energy mandates come from solar panels. The state requires that 20 percent of its energy be generated by renewable sources by 2022.

Senate Finance Committee Chairman Thomas M. “Mac” Middleton, D-Charles, said the wind bill should require an independent analysis to show that offshore wind will have a “positive net economic impact on the state of Maryland” before it can be implemented.

He also suggested exemptions for large commercial and industrial electric customers and caps on the amount residential electric bills could increase due to offshore wind power.

Concerns over the cost of offshore wind power scuttled the governor’s attempt to pass a similar bill last year. The administration now estimates guaranteeing a market for 400 megawatts to 600 megawatts of offshore wind power would cost the average residential consumer $1.55 a month.

House Economic Matters Committee Chairman Dereck E. Davis, D-Prince George’s, echoed the call for price increase caps for residential power customers.

Asked about a $2-per-month cap O’Malley offered last year, Davis said “I’d like to think that’d be the outer limit.”